The self-styled “Masters of the Universe” have done it again. Just three-and-a-half years after Wall Street’s best and brightest lost billions of dollars on bad bets and crashed the global economy, mega-bank JPMorgan Chase lost more than $2 billion (with perhaps more than another billion to come) on the same sort of risky trading. Earlier this spring, the bank bet heavily on derivatives instruments whose prices are tied to the value of corporate bonds. When the value of such bonds tanked in late March, losses began to mount, and the bank pulled the plug and went public with the debacle last week.

 

As of Monday, it was estimated that at least three executives will lose their jobs, although golden parachutes will doubtless limit their pain to the emotional realm. One of those, Chief Investment Officer Ina Drew, “retired” on Monday. Her total calculated compensation as of FY 2011 was $15.5 million, according to Bloomberg.

 

Ironically, JPMorgan Chase, through its CEO and mouthpiece Jamie Dimon, has been fighting tooth and nail against a regulatory change that would have prevented this latest disaster. The “Volcker Rule,” named for Paul A. Volcker, the former Federal Reserve chair who proposed it, would restrict banks whose deposits are federally insured from trading for their own profit, thus keeping high-rolling gamblers in banks from risking the federally insured deposits of average banking customers.

 

Although President Barack Obama proposed the Volcker Rule as part of Wall Street reform in January 2010, JPMorgan and Dimon have successfully lobbied to weaken it. As Dimon wrote in the company’s annual report, he believes the Volcker Rule would have “huge negative unintended consequences for American competitiveness and economic growth.”

 

As it turns out, it is the lack of the Volcker Rule that threatens the world economy, and JPMorgan Chase is now facing an investigation by the Securities and Exchange Commission into its recent activities.

-Matt Bewig

 

The Bet That Blew Up for JPMorgan Chase (by Peter Eavis and Susanne Craig, New York Times)

In JPMorgan Chase Trading Bet, Its Confidence Yields to Loss (by Ben Protess, Andrew Ross Sorkin, Mark Scott and Nathaniel Popper, New York Times)

S.E.C. Opens Investigation Into JPMorgan’s $2 Billion Loss (by Ben Protess and Susanne Craig, New York Times)

JPMorgan Loss Shows Wall Street Needs Limits, Trumka Says (by Kathleen Hunter, Bloomberg)

JPMorgan Sought Loophole on Risky Trading (by Edward Wyatt, New York Times)

 

Industrial & Commercial Bank of China Ltd. (ICBC), which is owned by the Communist government of China, will buy a controlling stake (80%) in the U.S. unit of Hong Kong-based Bank of East Asia Ltd., giving it ownership of 10 branches in California and three in New York.

 

“The deal is insignificant to ICBC’s operations but the implications are profound as it opens up the U.S. market to further expansion from ICBC,” Mike Werner, a Hong Kong-based analyst at Sanford C. Bernstein & Co., told Bloomberg News.

 

Werner called the decision by the Fed, which required approval from the U.S. Department of Justice, “a watershed moment, as it makes possible greater participation from other Chinese banks” in the U.S. banking sector.

 

ICBC has assets totaling $2.5 trillion and subsidiaries or branches throughout Asia as well as in Germany.

 

ICBC is one of the largest banks in the world, with $238 billion in market capitalization. But its strength and stability may be questionable, according to Bloomberg columnist Jonathan Weil.

 

“Much of [ICBC’s] capital consists of the remnants of bad loans dating to the 1990s,” wrote Weil.

 

“Either the Chinese government has become extremely skilled at lending in a very short time, and Chinese borrowers have become even better at repaying. Or the numbers are too good to be true, in which case the quality of the bank’s capital matters a great deal, as a gauge of its ability to absorb losses,” he added.

-Noel Brinkerhoff

 

ICBC Gets Fed Nod as Chinese Banks Seek U.S. Growth (by Jeran Wittenstein and Dakin Campbell, Bloomberg News)

Fed Clears China’s First US Bank Takeover (Agence France-Presse)

China’s Big Banks Look More Like Paper Tigers (by Jonathan Weil, Bloomberg)

 

But if a so-called independent group can sling your mud for you, then going negative is a much more successful strategy, according to two professors at Dartmouth College.

 

In their study published by the American Politics Research journal, Deborah Jordan Brooks and Michael Murov say it is better for an independent expenditure committee to pay for negative commercials because voters can’t really identify who’s behind such nastiness. Such groups often have innocuous names like Restore Our Future (pro-Mitt Romney) or the Red White and Blue Fund (pro-Rick Santorum).

 

“The fact that the public cannot identify the contributors to so many of these groups thus makes it easier for these groups to go on the attack,” Brooks and Murov wrote.

 

Independent advertising in this year’s presidential campaign has skyrocketed compared to 2008—by 1,600%, according to the Wesleyan Media Project. And more than 85% of these ads have negative messages.

 

-Noel Brinkerhoff

 

Are Independent Attack Ads More Effective Than Candidate Attack Ads? New Research Says Yes (by Lee Drutman, Sunlight Foundation)

Assessing Accountability in a Post-Citizens United Era: The Effects of Attack Ad Sponsorship by Unknown Independent Groups (by Deborah Jordan Brooks and Michael Murov, American Politics Research) (pdf)

Pro-Romney Super PAC Spent More in Florida than McCain’s Entire 2008 Primary Ad Budget (by Noel Brinkerhoff and David Wallechinsky, AllGov)

 

According to a new Gallup poll, 32% of young workers (age 18-29) are underemployed, a category that combines the unemployed with individuals who are working part-time but are seeking full-time work.

 

The rate in March was 30.1%, and last year it was 30.7%, indicating the job market has grown worse for this group of Americans.

 

It also means trouble for them in the future: If one in three Gen Y’ers can’t gain full-time job experience while they’re young, their prospects may be slim for landing good jobs in their later years. Without experienced, skilled workers, U.S. businesses will suffer in the coming decades.

 

If there’s a silver lining, underemployment among all Americans has gone down over the past year to 18.2%. A year ago it was 19.3%.

-Noel Brinkerhoff, Vicki Baker

 

One in Three Young U.S. Workers Are Underemployed (by Dennis Jacobe, Gallup)

One-Third of Workers Under 35 Live with Parents (by Noel Brinkerhoff and David Wallechinsky, AllGov)

 

From May 2011 to April 2012, the nationally averaged temperature was 2.8 degrees Fahrenheit above what scientists called the “long-term average” for the entire 20th century.

 

Last month alone, warmer-than-average temperatures occurred in nine states located in the Central and Northeast regions. The National Oceanic and Atmospheric Administration (NOAA) reported that above-average temperatures also were recorded in the Southeast, Upper Midwest and much of the West.

 

So far in 2012 (not counting the month of May), the U.S. (minus Alaska and Hawaii) has experienced the warmest four-month period on record, with an average temperature of 45.4 degrees Fahrenheit. This temperature was 5.4 degrees above the long-term average, according to the NOAA.

-Noel Brinkerhoff

 

U.S. Temperatures for April Third Warmest on Record (National Oceanic and Atmospheric Administration)

Ten Warmest 12-month Periods for the Contiguous U.S. (National Oceanic and Atmospheric Administration)

 

They have spent less time in the Oval Office than their conservative counterparts over the last five decades, but Democratic presidents have presided over better private sector job growth than Republicans.

 

Bob Drummond at Bloomberg analyzed 50 years worth of statistics from the Department of Labor and found that non-government payrolls increased by about 42 million jobs under Democrats, compared with 24 million for Republican presidents.

 

The advantage in job growth occurred despite the fact that Democrats occupied the Oval Office for 23 years since John F. Kennedy’s inauguration, while GOP presidents spent 28 years in charge.

 

Over the last 50 years, the monthly average of new private sector jobs under Democrats was 150,000, while under Republicans it was only 71,000, according to Drummond.

 

President Bill Clinton had the best record with 217,000 private-sector jobs a month, followed by Jimmy Carter at 188,000 and Ronald Reagan with a monthly average of 153,000.  Private jobs actually shrank by an average of 6,700 a month under President George W. Bush, while private employers in the United States have added 900 jobs a month since President Barack Obama took office.

 

This evaluation follows a previous Bloomberg study that showed the stock market also performs better under Democratic presidents.

-Noel Brinkerhoff, David Wallechinsky

 

Private Jobs Increase More With Democrats in White House (by Bob Drummond, Bloomberg)

Pharmaceutical company Abbott Laboratories has agreed to pay $1.6 billion to settle accusations that it illegally marketed the anti-seizure medication Depakote for uses not approved by the Food and Drug Administration (FDA).

 

About $800 million will go to resolve civil cases brought by federal and state governments, while $700 million will cover criminal penalties. State governments will receive another $100 million to resolve consumer protection cases.

 

As part of the settlement, Abbott will plead guilty to one misdemeanor violation of federal law for misbranding Depakote. The company will be on probation for five years, but, as usual, no individuals will be charged. Miles W. White has been CEO and chairman of the board of Abbott since 1999.

 

The U.S. Department of Justice accused Abbott of illegally marketing Depakote for uses including for treatment of schizophrenia, agitated dementia and autism. According to the FDA, in 1999, Abbott was forced to halt testing of Depakote for dementia “due to an increased incidence of adverse events, including somnolence, dehydration and anorexia experienced by the elderly study participants.”

 

The company also allegedly gave doctors and pharmacists illegal kickbacks in exchange for promoting non-FDA approved uses of the drug.

 

On the market since 1983, Depakote was first approved as an anti-seizure and mood-stabilizing drug for adults and children age 11 and older. Since then, the drug has been authorized by federal regulators to treat other types of seizures, manic episodes of bipolar disorder and migraine headaches.

 

The settlement with Abbott brings the amount recovered by the government for health care fraud to $10.2 billion since Barack Obama became president of the United States.

-Noel Brinkerhoff, David Wallechinsky

 

Abbott To Pay $1.6B To Settle Depakote Claims (by Peter Frost, Chicago Tribune)

The American workplace is not as safe as it could be. Every day in the United States, 13 people are killed on the job, about 137 die from occupational diseases and at least 10,000 suffer workplace injuries or illnesses, according to data recently released for 2010 by the Bureau of Labor Statistics (BLS). The total of 4,690 Americans who died due to traumatic injuries at work in 2010 represented an increase over the 4,551 deaths reported in 2009, and yielded a rate of fatal injuries for 2010 of 3.6 per 100,000 workers, compared to 3.5 per 100,000 workers in 2009.

 

Largely because of the 2010 Upper Big Branch mine explosion, which killed 29 miners, West Virginia had the highest fatality rate in the country at 13.1 fatalities per 100,000 workers, followed by Wyoming and Alaska, while New Hampshire had the lowest fatality rate, at 0.9 per 100,000, followed by Massachusetts and Rhode Island.

 

Workers in agriculture, forestry, fishing and hunting faced the highest fatality rate, at 27.9 per 100,000, followed by mining and transportation and warehousing. Latino workers face a fatality rate 8 percent higher than the national average, with 62 percent of fatal injuries to Latino workers found among workers born outside the United States.

 

Since the passage of the Occupational Safety and Health Act of 1970, which created the Occupational Safety and Health Administration (OSHA), the fatality rate has plummeted, from 18 deaths per 100,000 workers to only 3.6 today, saving more than 451,000 workers’ lives. Compared to other advanced, industrialized nations, however, the fatality rate in the U.S. shows great room for improvement. According to data from the International Labor Organization (ILO), a U.N. body headquartered in Geneva, Switzerland, the U.S. fatality rate of 3.6 is worse than that of Australia, which has a rate of only 2.1, Canada (2.7), Estonia (3.2), Finland (1.7), France (2), Germany (2.04), Hungary (2.99), Ireland (2.5), Norway (2), Spain (3.3) and Sweden (1.5). The U.S. bests the rates of Austria (4), Czech Republic (3.8), Italy (4), Poland (4.5), Russia (10.9), Slovakia (4), and Ukraine (8).

 

Part of the reason may be that the U.S. commits few resources to workplace safety. OSHA and the state-level OSHA agencies have a total of 2,178 inspectors to inspect the 8 million workplaces under their jurisdiction. Federal OSHA can inspect workplaces on average once every 131 years; the state OSHA plans can inspect them once every 73 years. The current level of federal and state OSHA inspectors provides one inspector for every 58,687 workers, much lower than the ILO standard of 1 for every 10,000 workers.

 

BLS released the data only three days before Workers’ Memorial Day (April 28), which is a day to remember workers who were killed, injured, or made ill at work and to highlight danger in the workplace.

-Matt Bewig

 

National Census of Fatal Occupational Injuries in 2010 (Bureau of Labor Statistics) (pdf)

Death on the Job: The Toll of Neglect (AFL-CIO) (pdf)

Aircraft manufacturer Boeing has unveiled its first plane built at a new plant in South Carolina, where non-union workers are trying to prove they’re just as capable of producing quality jetliners as the organized labor workforce in Washington State.

 

The 787 Dreamliner that rolled out of the North Charleston assembly building on April 27 represented the first commercial jet built on the East Coast and the first assembled by a nonunion workforce, according to The Wall Street Journal. It was built for Air India.

 

For decades, Boeing relied on unionized machinists in Washington to produce its 700 series of planes. But after five strikes in 35 years by the International Association of Machinists and Aerospace Workers, company executives decided to relocate to South Carolina, a nonunionized “right-to-work” state.

 

The government of South Carolina lured Boeing to the state with a huge incentive package that included $170 million in low-interest loans for construction; sales tax exemptions for computers, material and fuel used in test flights; property tax breaks worth at least $300 million; and a pass on almost all state corporate income tax for 10 years. The state also agreed to spend $33 million to train workers for Boeing. To fund this package, South Carolina had to borrow $270 million, which will grow to $399 million once interest payments are included.

 

Building sophisticated aircraft with untested workers is considered a risk for Boeing, whose future could be jeopardized if the planes don’t match the manufacturer’s reputation for quality and reliability.

-Noel Brinkerhoff, David Wallechinsky

 

Untested South Carolina Outpost is Central to Boeing's Dreamliner Hopes (by Jon Ostrower, Wall Street Journal)

Boeing South Carolina Rolls Out First Plane, Looks To Future (by Brendan Kearney, Charleston Post and Courier)

Boeing’s Fight with Unions Spills into Obama Administration and Senate (by Noel Brinkerhoff and David Wallechinsky, AllGov)

Boeing Sales Force Includes…U.S. Government Officials (by Noel Brinkerhoff, AllGov)